Financial-i News

The supply chain is a company's secret weapon

Thu, 26 Jan 2012 00:00:00 GMT

We have all heard the stories about corporates hoarding cash. REL Consultancy estimates that there is USD 1.7 trillion being hoarded in cash by big corporations. Most corporations are not getting a great return on their cash however, with yields on most short-term investments much lower than they have been historically.

In the January 2012 edition of financial-i, Drew Hofler, senior manager, Financial Solutions, Ariba, maintains that corporates should seriously consider putting their excess cash to work by looking more closely at opportunities within their supply chain. "Cash that's hoarded in traditional, low-return liquidity vehicles is cash that's losing value and potentially creating risk," says Hofler.

Ariba maintains that buyers on its network captured discounts of more than USD 4.5 million in 2011 and that buyers receiving these discounts saw average annual returns of between 10% and 30%, far greater than the returns delivered through traditional investments.

For Drew's full article click here.

Regional adoption of a financial transaction tax would be catastrophic

Thu, 26 Jan 2012 00:00:00 GMT

In the January 2012 issue of financial-i, columnist John Gubert says the financial transaction tax proposed by Germany and France on equity, bonds and some derivatives transactions, will not work unless it is applied globally. UK Prime Minister David Cameron and the US are less in favour of a transaction tax. The UK maintains it already imposes stamp duty on some transactions and those countries with a substantial financial sector like London appear to be more opposed to a tax for fear it could destroy the UK's reputation as a global financial center.

John maintains that the results of regional adoption of the tax (in other words if France or Germany or the eurozone just implemented it) would be "catastrophic" for governments, corporate issuers, investors and employment.

To read the full article click here.

Fundtech and Dataline provide EIPP and financial supply chain solutions to corporates in Asia Pacific

Thu, 26 Jan 2012 00:00:00 GMT

Fundtech and Dataline, a leading Australian payment solution & services company, will jointly offer electronic invoice presentment and payment (EIPP) and related financial supply chain services to corporate customers in Asia Pacific.

Corporates who implement these services can benefit from replacing slow and costly paper-based processes with a quicker, more efficient and greener technology. For example, within the accounts receivable (AR) department, corporates can speed up the billing process by sending their invoices electronically rather than on paper and then manage them online. Instant delivery together with query management tools can lead to faster settlement and reduced ‘days sales outstanding’ (DSO). On the accounts payables (AP) side, corporates can accept supplier invoices in any format straight into their e-invoicing hub, which reduces manual input, eliminates errors and helps to drive down costs.

There is also the option for AP departments to make an instant switch from paper to electronic by utilising a ‘paper-to-data’ service. Whether a company processes invoices by mail, fax, email, EDI or other electronic channel, the data is captured, validated to agreed business rules and finally uploaded to an ERP or accounting system.

Dataline’s products complement Fundtech’s compliant Accountis EIPP service as they both enable corporates to automate complex financial processes, increase transaction visibility, reduce costs and eliminate paper. By working together Dataline and Fundtech will offer a complete range of financial supply chain solutions, which includes outbound (AR) and inbound (AP) e-invoicing, AP workflow automation, data scanning, e-payments support and online expenses management.

“Fundtech and Dataline already have many customers in common and look forward to growing our joint customer base further. We share the same vision and values. Both companies want to take the pain out of finance and reducing unnecessary manual work by taking AR and AP processes online. Together, our services provide busy finance staff with the ability to view, manage and process all their finance documents in one secure location. This real-time access to data gives them greater visibility of the financial supply chain so that they can better optimize their working capital,” said Ken Swanson, Managing Director of Dataline.

Gil Gadot, managing director of Fundtech’s Financial Supply Chain Services strategic business unit, said: “Dataline is an established software company with whom we share a passion for providing innovative and cost-saving financial services that eliminate paper from the process. Fundtech already has a strong presence in the Asia-Pacific region and our partnership with Dataline will help us to further expand our e-invoicing network, which already has around 200,000 corporate connections worldwide.”

Corporate treasury professionals join the Basel-bashing bandwagon

Tue, 24 Jan 2012 00:00:00 GMT

When the Basel III regulations were first mooted, trade finance banks were particularly vocal about the impact it would have on the pricing and availability of traditional trade finance instruments such as letters of credit and bank guarantees. All sorts of gloomy scenarios were painted by the trade banks and the industry associations that represented them including Dan Taylor, president and chief operating officer, of BAFT-IFSA. He pinpointed studies suggesting that Basel III could take USD 300 billion worth of trade flow out of the picture if capital requirements are so restrictive that banks no longer see it as an attractive business.

At last year's Sibos conference in Toronto last October, Kah Chye Tan of Barclays Corporate resisted the temptation to jump on the Basel-bashing bandwagon. He said that the banks had had 20 years to get their act together when it came to Basel and being able to compile data to demonstrate to the regulators that trade finance was low risk. "We had to wait for a major sub-prime crisis to get our act together on data," he stated. "We can't keep putting the blame on Basel."

Having evaluated the impact of Basel II and Basel III in low-income countries, the Basel Committee on Banking Supervision last October decided to "waive the one-year maturity floor for certain trade finance instruments under the advanced internal ratings-based approach (AIRB) for credit risk." It also agreed to waive the "sovereign floor" for certain trade-finance related claims on banks using the standardised approach for credit risk. However, the100% credit conversion factor (CCF) in calculating the leverage ratio for contingent trade-finance exposures remained in place.

As the regulatory constraints on banks' capital continue to pile up their fear mongering appears to have spread to the corporate community. According to a recent survey of corporate treasury professionals conducted by EuroFinance, 57% of Western European corporates expect the implementation of Basel III will negatively impact their company performance. Yet, 40% of corporates, including Western European companies, indicated that Basel would have no impact. Another 61% of European corporate treasurers believe banking regulators do not understand the impact of regulation on corporates and trade finance. Even more banks (67%) indicated regulators did not understand the consequences of their actions. Western European corporates were split between those (42%) that predicted flat revenue or profit, and those (42%) that predict increased revenues and/or profit for the coming year.

"Substantial projects with reasonable to good prospects will not materialise due to banks' Tier 1 capital constraints," remarked one European corporate treasurer EuroFinance surveyed. Another commented that Basel III "will increase the cost of funds for mid and small caps, increase inflation, and destroy value in Europe."

The question remains will companies and the banking community in general have to pay the price for having "safer" banks under the Basel III capital regime. Will forcing banks to hold more capital on their balance sheets deliver the levels of "safety" regulators and politicians are looking for? Is there some other way that banks could meet the Basel III requirements without passing on the costs to their end customers?

One thing is for certain, corporates will have to reassess their traditional funding models.

Bankers think Singapore's Immediate Payments will have a positive effect on business

Fri, 20 Jan 2012 00:00:00 GMT

Fundtech announced the results of a survey conducted at its December Innovation Series Breakfast meeting held in Singapore. The poll of nearly 50 bankers from leading Asian financial institutions found that the vast majority believe that Immediate Payments will have a positive effect on business in Singapore.

The survey findings are significant because they demonstrate strong support for the new high-speed low-value payment scheme being developed in Singapore, considered to be a model for other countries throughout the region.

The survey found that bankers see the potential for Immediate Payments to drive new bank service-fee revenue from both consumers and businesses. A poll of the banking executives in attendance revealed the following:

· While all (100%) of the respondents think that Immediate Payments will have a positive effect on doing business in Singapore, 73% think that it will make Singapore an easier place to do

business.

· 93% believe that Immediate Payments will have a positive effect on their own businesses.

· 88% believe that businesses will utilise Immediate Payments – although respondents were split on how often: 43% said that businesses will use it extensively, while another 43% said that it

would be used moderately.

· 63% believe that Immediate Payments will only be adopted in the advanced banking centers in the region; while 27% believe that it will be widely adopted throughout the region.

The survey was taken at Fundtech’s Executive Innovation Series in Singapore in early December. The conference included presentations from a number of thought leaders including Colin Klipin, former Barclays vice chairman of Global Payments. Mr. Klipin played a central role in the development of UK Faster Payments, and his keynote address offered many lessons learned from his experience.

Commenting on the event and survey results, Mr. Klipin said: “In a real-time world it is only natural that payment systems keep up with the pace of business. The availability of Immediate Payments will have a positive effect on those Asia-Pacific economies that adopt such a scheme. The strong attendance at Fundtech’s event and the responses to the survey clearly show there is broad interest in the topic among bankers.”

Gil Gadot, Fundtech managing director for Asia-Pacific and a presenter at the meeting said: “Fundtech’s experience with new payment schemes around the world enables us to support those banks willing to be part of the innovation process in payments.” At the conference Mr. Gadot’s address presented case studies on how Fundtech has enabled its UK-based banking clients to gain first-mover advantage in developing their UK Faster Payments infrastructure. Both speakers focused on how banks can prepare a strategy for Singapore's Immediate Payments and how they can profit from the new payment scheme.

Otkritie Capital opts for cloud-based market abuse surveillance

Fri, 20 Jan 2012 00:00:00 GMT

Otkritie Capital has selected NICE Actimize to provide cloud-based market abuse surveillance and anti-money laundering solutions in support of its cross-asset Direct Market Access (DMA) platform and broker dealer activities. Services will be hosted by NICE Actimize from the company’s UK data centre.

Otkritie Capital services are rendered in the UK by Otkritie Securities Limited, an indirect subsidiary of Otkritie Financial Corporation JSC, one of the leading financial services providers and prime brokers in Russia. According to Otkritie Capital, its direct market access (DMA) platform allows customers to take advantage of the latest technology to reduce costs and greatly increase the speed of transactions, opening up more trading strategies and opportunities than ever before. Otkritie Capital will rely on NICE Actimize’s cloud-based technology for its trading practices compliance programme to detect and report potential market abuse and money laundering activities across its European business. A combined global team based in London, Moscow and Frankfurt will coordinate delivery of NICE Actimize’s market abuse surveillance and anti-money laundering solutions.

NICE Actimize's solutions are used by the world’s largest financial institutions and regulators to increase their insight into suspicious behaviour and improve risk and compliance management. While some regulators, securities firms and investment banks still rely on manual or semi-automated processes to monitor compliance with market abuse regulations, automation such as that provided by NICE Actimize’s products improves the identification and reporting of suspicious transactions within this environment. It provides cloud-based solutions in addition to on-premise support as an alternative delivery mechanism, and hosts them in a secure data centre. The cloud-based delivery approach minimises deployment time, reduces total cost of ownership and speeds return on investment.

“Otkritie Capital conducted a rigorous search with stringent criteria before choosing NICE Actimize for the automation of our regulatory compliance initiatives in trading and fixed income,” said Nils Jahn, managing director of Global Electronic Trading at Otkritie Capital. “We were impressed with NICE Actimize’s strong performance record in implementing cloud-based solutions quickly with large financial institutions, particularly across global organisations.”

“As the needs of the securities market evolve, we remain committed to providing cloud-based solutions that enable rapid deployment, offer minimal business disruption, and which ease the burden of regulatory compliance,” said Amir Orad, president and chief executive officer of NICE Actimize.

Shake-up at BNY Mellon Asset Servicing

Fri, 20 Jan 2012 00:00:00 GMT

BNY Mellon has reorganized its asset servicing management team. Vince Sands is named as deputy CEO of BNY Mellon Asset Servicing reporting to Tim Keaney, vice chairman and CEO of BNY Mellon Asset Servicing. Samir Pandiri, previously CEO of BNY Mellon Shareowner Services replaces Sands as head of the America’s Asset Servicing business and will report to him.

Lou Maiuri, previously head of outsourcing is named as head of the Global Financial Institutions business. Maiuri takes over from Nadine Chakar who becomes global head of BNY Mellon’s Derivatives360^sm business. Chakar will report to Karen Peetz, vice chairman and CEO of Financial Markets and Treasury Services at BNY Mellon.

Hani Kablawi is named as head of EMEA Asset Servicing*, replacing Frank Froud who is leaving the company. Kablawi has recently acted as head of Client Management for the EMEA region. Both Maiuri and Kablawi will report to Tim Keaney. Chong Jin Leow, head of Asia Pacific Asset Servicing, will continue to report to Keaney.

Tim Keaney said: “These changes will enable us to have a more focused and streamlined approach to building our business and delivering excellent client service in a rapidly changing economic environment. Vince, Samir, Lou and Hani all have terrific experience within our company and deep knowledge of the asset servicing business. We have excellent bench strength in our management team, and I am looking forward to working with all of them to design and deliver the best and most innovative solutions and services to our clients around the world."

SEPA: Banks' reactive approach is a dangerous strategy

Wed, 18 Jan 2012 00:00:00 GMT

Progress on implementing the Single Euro Payments Area (SEPA) has stalled. Many in the European banking industry are awaiting the SEPA end date regulation, which promises to confirm the deadline for migrating domestic payments instruments to SEPA, before readying themselves for the change. Yet this narrow deadline-focused vision fails to acknowledge that SEPA presents a major opportunity for European banks, although also a potential threat.

Certainly, SEPA will reshape the market and, post SEPA, all participants will need to re-establish their market position in the payments industry. Volatility in the eurozone has supported those financial institutions lacking urgency when it comes to implementing SEPA payment tools. The focus of banks has legitimately turned towards their balance sheets rather than enabling SEPA payments. However, institutions must recognise that progress towards standardised payments will continue unaffected by the ‘financial crisis’ — making waiting for a resolution to the eurozone crisis a risky tactic with respect to the long-term prospects of their payments processing business.

Undoubtedly, SEPA migration will lead to considerable costs, consisting of administrative expenses, training of staff and heavy investment in technology with the capacity to support SEPA payment instruments. And of course, some banks may be unable or unwilling to meet these costs in the current climate. In such cases, finding a suitable global banking partner — one that possesses the technological expertise and SEPA know-how to assist in developing strategies and deploying payments solutions — will become essential if they wish to remain competitive.

New competition , new strategy

In fact, SEPA is likely to herald increased competition by lowering the barriers for non-bank payments institutions to enter the market. The lure of high-value SEPA revenue will attract new players, which could result in banks that are unprepared for SEPA being reduced to providing the least profitable services such as compliance and settlement. And it is these ambitious new institutions that pose the greatest threat to the traditional role of banks in this area. Thomas Egner, a director at Commerzbank and the bank’s representative at the European Payments Council (EPC) Plenary supports this view — stating that: “Given that there are numerous institutions in the market that regard SEPA as an opportunity to win market share, banks that delay their SEPA migration may find themselves unwittingly helping others achieve that objective”.

Yet SEPA is a long way from a negative threat for European banks. It presents positive opportunities for banks to increase efficiency, lower operational costs and improve the quality, value and breadth of services offered to their customers. That said, still many banks prefer a reactive approach to SEPA migration, which runs the risk of isolating themselves in what will become a highly-competitive environment. A proactive strategy is therefore essential. For instance, banks need to implement steps to educate and inform their corporate clients in relation to SEPA migration — helping them understand how they can centralise direct debit processing and drive improvements and efficiencies in their treasury and cash management operations.

Banking partner

Of course, migration is a complex process (another reason many delay). Given this, it is vital to choose a banking partner with the expertise to advise on both the wider SEPA strategy and the nuances of adoption. Some banks may choose to acquire their own proprietary systems to process payments in-house. While others may seek to minimise costs and risks by outsourcing SEPA migration to the banks with the technological capabilities of providing efficient SEPA Credit Transfer and Direct Debit services.

Certainly, those European banks committed to SEPA and with the weight and reach to develop the technology required for efficient migration — including Commerzbank — have taken the lead with respect to offering other financial institutions their experience and expertise for SEPA adoption. Those that don’t want the lead should weigh the various options, but should not ignore the inevitable march towards SEPA adoption. SEPA will make the market more competitive and banks who fail to act risk their futures as leading payments providers to the more forward-looking competitors now entering the market.

SWIFT to deliver connectivity solution for T2S

Wed, 11 Jan 2012 00:00:00 GMT

Following a public procurement process run by the Banca d’Italia on behalf of the central banks of the Eurosystem, SWIFT, the financial messaging provider, was awarded a licence to provide connectivity services to TARGET2-Securities (T2S).

The objective of T2S is to facilitate post-trading integration by offering core, neutral, harmonised and commoditised delivery-versus-payment settlement in central bank money in substantially all securities in Europe. This will ensure efficient and sound clearing and payment systems and support the Lisbon agenda in securities markets.

As a future network service provider, SWIFT will design, implement, deliver and operate its own connectivity solution for the secure exchange of business information, in ISO 20022 format, between directly connected T2S participants and the T2S platform.

Following the execution of a licence agreement with the Eurosytem, SWIFT will proceed to the implementation of a proof of concept (POC) of its T2S connectivity solution during the first half of 2012.

Alain Raes, chief executive, EMEA, SWIFT, says: “We are delighted to have been selected as a network service provider for T2S. This decision reflects our competitive pricing and our position as the de-facto provider for connectivity and interoperability services in the European clearing and settlement market. Our T2S solution will offer the widest geographic coverage and the highest levels of service availability at the best price, in line with our commitment to helping our community transition to a T2S environment with maximum efficiency and at least cost.”

Asian corporate sentiment remains buoyant despite demand, cost and regulatory pressures

Wed, 11 Jan 2012 00:00:00 GMT

The possibility of a double-dip recession in the West has failed to dampen the enthusiasm of Asian corporates who see strong growth prospects ahead despite demand, cost and regulatory pressures.

Standard Chartered's inaugural corporate sentiment survey conducted by the bank’s equity research team focuses on optimism amongst corporates in Indonesia and in the energy sector; as well as a better inflation outlook in 2012 for most Asian economies. This the first in a quarterly series of surveys, was based on the views of 529 C-Suite executives from seven Asian economies and 12 industry groups, 99% of whom are clients of Standard Chartered and business contacts of the equity research team. The survey differentiates itself by structuring questions that draw out important links between economic variables such as corporate order books, costs and margins, as opposed to focusing on single-issue variables. The responses thus help build a complete picture of the outlook for industry sectors and economies.

Alongside the stand-out conclusions, the survey identifies the rising trend in the use of the RMB as a settlement currency, with 37% of respondents using or intending to use it. The energy sector is also expected to benefit from a wave of new capital in 2012, with 44% of respondents indicating their plan to tap into the debt market for raising new capital.

Clive McDonnell, chief equity strategist at Standard Chartered equity research, commented, “Investment implications from the survey support our recommendation for continued emphasis on companies that focus on domestic demand, particularly in Indonesia. We also expect margin pressure to ease in 2012, reflecting improvement in inflation expectations.”

Key challenges facing corporates in 2012 have also been identified in the survey. Twenty-eight percent of respondents see demand as their greatest challenge, closely followed by cost pressures, at 25%. Regulatory uncertainty took the third spot, with 19% of respondents indicating it as their biggest challenge.

“A likely recession in the West in 2012, as judged by our respondents, has failed to dampen bottom-up corporate sentiment in Asia. Our Aggregate Index signals a slight improvement in the lead indicators for business prospects in the year ahead, despite challenges of demand, cost pressures and regulatory obligations,” added McDonnell.

Analysis of the responses to the survey highlights a number of nuanced conclusions, with specific implications for investors:

Buoyant new orders are centered on economies that are more domestically oriented, including Indonesia, India and Thailand.
Capex and hiring plans are also biased towards these economies, whereas cyclical economies (with the exception of Korea) and sectors are less positive.
The RMB is gaining traction as a settlement currency, with 37% of the respondents using or intending to use it.
The biggest challenges faced by corporates are: the demand outlook (selected by 28% of respondents), cost pressures (25%) and regulation (19%).

Syntesys Acquistion will strengthen SunGard AvantGard's Ecosystem Communication Hub

Mon, 09 Jan 2012 00:00:00 GMT

SunGard has completed its acquisition of Syntesys, a European SWIFT service bureau and network of business and technical experts dedicated to serving the SWIFT community. The acquisition, the terms of which were not disclosed, is not expected to have a material impact on SunGard’s financial results.

The Syntesys acquisition will strengthen SunGard’s AvantGard Ecosystem Communication Hub (Echos) offering by expanding service bureau delivery capacity and locations as well as adding a suite of SWIFTReady services. SunGard’s AvantGard Echos provides managed connectivity for corporations and financial institutions with access to a suite of services such as electronic bank account management (eBAM), statement aggregation and bank fee analysis. The management and staff of Syntesys will join SunGard and will be based in France, the United Kingdom, Switzerland and Germany.

Adyl Sayagh, chief executive officer of Syntesys said, “The addition of Syntesys solutions to the SunGard offerings will help our corporate and banking customers gain easier and faster connectivity. Our services help banks deliver greater value to their corporate customers while helping corporations streamline their connectivity.”

Scott Coffing, president of SunGard’s corporate liquidity business, said corporate treasurers are also looking for more services to be delivered through the bank communication channel including eBAM. In order to help meet this requirement, SWIFT selected SunGard for its eBAM Central Utility Pilot to help corporations achieve straight-through-processing of eBAM messages. Now, with Syntesys, we can also offer a suite of services to assist with onboarding as well as increased delivery capacity.”

Syntesys is one of the first European networks of business and technical experts fully dedicated to serving the SWIFT community. It has a proven track record in providing end-to-end professional services and SWIFT-enabled solutions and was created in January 2008, from the merger of OnFin and Cardinal Consulting, SWIFT service partners and providers of business and technical solutions to SWIFT customers in France and Switzerland.

SIA and Colt win the tender for the access network to TARGET2-Securities

Mon, 09 Jan 2012 00:00:00 GMT

SIA and Colt were awarded a network service provider license for the design, creation and management of the new infrastructure that will link central depositories, Eurosystem central banks and the leading European bank groups to TARGET2-Securities. The license was awarded by European Central Bank.

Conceived by the European Central Bank, TARGET2-Securities is the project designed to create a single European platform for the settlement of securities transactions. It will be managed by four central banks (Banca d’Italia, Deutsche Bundesbank, Banque de France and Banco de Espana).

The TARGET2-Securities project was conceived in 2008 by the European Central Bank and will be managed by four central banks (Banca d’Italia, Deutsche Bundesbank, Banque de France and Banco de Espana). It will create a single European platform for the settlement of domestic and cross-border securities transactions and integrate post-trading infrastructures, which are still fragmented 10 years after the introduction of the single currency.

TARGET2-Securities is one of the initiatives for the creation of the single European market, which follows the introduction of the euro, TARGET2, SEPA (Single Euro Payments
Area) and the PSD (Payment Services Directive).

The delivery of the new T2S platform is planned for mid-2015. According to European Central Bank figures, TARGET2-Securities will process a daily average of more than 1 million securities transactions with positive effects on the costs of cross-border settlements, where it is forecast there will be a significant reduction.

The successful partnership between SIA and Colt, created for this project, reflects on the experience of both companies in providing highly secure, networked solutions to the financial services sector across the European markets.

SIA is one of the leading service providers in Europe in the banking and financial sectors and processes a daily average of more than 3 million transactions through a proprietary network infrastructure (SIAnet) with two operational hubs, one in Milan and one in London.

Colt, Europe’s leading information delivery platform, is an established provider of managed services to the financial sector. It provides connectivity to a number of stock exchanges across Europe and some of the fastest connections between key trading capitals such as London and Frankfurt.

Banking at a crossroads

Thu, 22 Dec 2011 00:00:00 GMT

The global banking sector is at a crossroads, following the unprecedented turmoil of the past four years. As it seeks to reinvent itself, the sector faces several critical inflection points that will affect the future creditworthiness of banks. It is too early to tell how each one will play out but we believe that our new banking criteria provides a coherent, globally consistent framework to assess how these developments are likely to affect the creditworthiness of banks.

The first major inflection point currently facing the banking sector is a potential shift in the power balance of global banking between banks in the developed markets of Western Europe and the U.S. on one side, and the larger emerging countries in Asia and Latin America on the other. The second inflection point is the continuing regulatory uncertainty facing banks. While many attempts at regulation on a global basis have been tried, devising a universal system promises to be a thorny and potentially elusive quest.

The third inflection point is the potential consequence of a change in the nature of government support for banks. The intervention of governments and central banks around the world has succeeded in creating an interim period of stabilisation for many of the Western European and the U.S. banking systems. But, as the events of the last few months have shown, it is a fragile peace.

We believe that governments are looking for ways to reduce their contingent risk to the banking sector, but not at the expense of undermining the financial system. Consequently, we expect many governments will continue supporting banks until they are strong enough to stand without support. For some this could take years, if ever.

Our new bank criteria aim to provide greater transparency and consistency to reflect this evolving market. They place a greater emphasis on the country in which a bank operates, through an enhanced version of our existing banking industry country risk assessment (BICRA) methodology. By doing this, we will give more weight to the risks associated with growing economic imbalances, the resilience of the economy, and the importance of system-wide funding and the role of governments and central banks in this funding.

This starting point is then adjusted up or down the rating scale to reflect our assessment of a bank’s specific strengths and weaknesses in business position, capital and earnings, risk position, and funding and liquidity. After this, we assess the potential for government support and/or group support. Following final analytical adjustments and a vote by a rating committee, this then leads to the issuer credit rating.

Our new criteria will allow us to clearly separate the stand-alone credit profile and the impact of government support in our ratings. This means that a change in the likelihood of future government support for banks will be clearly identified and articulated.

In conclusion, regardless of governments' recent and emerging policy responses, the historic pattern of banking sector boom and bust and government support will likely repeat itself in some fashion. New laws put in place following previous crises, such as deposit insurance, have not prevented subsequent downturns. Banking crises will likely happen again.

Our revised criteria will enable us to provide opinions that reflect the impact of these major systemic changes on the banking sector.

The renminbi - the new third man on the trading stage

Thu, 22 Dec 2011 00:00:00 GMT

Plans announced in September by UK Chancellor George Osborne to develop London into an offshore trading centre for China’s renminbi (RMB) currency focused attention once again on the growing attractiveness of settling trades in RMB for European businesses. The move followed a meeting with Chinese vice-president Wang Qishan and gave official Treasury support for the City’s push to trade the RMB, a market expected to grow rapidly for trade, foreign exchange and bond issuance.

Increasingly the renminbi is viewed across the world as a viable third trading currency, and a challenger to the US dollar and euro as the settlement currency of choice: in fact HSBC forecasts that by 2015 over half of Chinese trade with emerging markets (approximately USD 2 trillion) will be settled in RMB.

European businesses have witnessed this growth, and its inherent opportunities, with interest. Recent HSBC ‘Doing Business in China’ events in Poland and Turkey have demonstrated a real appetite from businesses to adapt and exploit RMB as a working currency. Now offering RMB settlement facilities in more than 40 countries, HSBC has facilitated RMB transactions in several countries across Europe including France, Germany, Russia, Turkey, Poland and the Czech Republic, helping local businesses use RMB to maximise the potential of their products and services. The rise of the RMB has been fast - it was only in 2010 when the Chinese government undertook a specific campaign to internationalise the currency, but it has quickly established itself as a viable option for trades and the currency has outstripped expectations, with RMB 975 billion worth of trade in China settled in renminbi in the first half of 2011 alone.

Certainly, the deregulation of the RMB is a huge positive for businesses day-to-day cash management. Being able to hold the proceeds of trade settlements in RMB gives a firm a natural currency hedge, but also a diversification of offshore currency holdings.The RMB could also have a potential positive impact in strengthening trading relations, as working in RMB can strengthen importers’ positions when negotiating contract terms and pricing. For exporters, trading in RMB offers their trading partners increased flexibility whilst reducing the chance of exchange rate fluctuations impacting on margins. Where both the vendor and purchaser settle in RMB, both businesses could benefit from reduced costs and transaction times.

Anecdotal evidence from our colleagues in HSBC China also suggests that countries outside of the eurozone, for example Turkey, currently see a strong growth in export volumes, eyeing China as a strategic trading base, and are very keen to trade directly from their own currency into the RMB. Potentially we may also see a future in which traders from two countries, neither of which use the RMB, choose to settle in the currency in a bid to benefit from reduced costs and transaction times.

The speed of change with regards to the RMB has been phenomenal, and yet there is no set date at which point it will become ‘fully convertible’ (free from the restrictions that it is still currently subject to). But for businesses, this means pushing ahead now with plans to become RMB-competent. As HSBC’s recently launched Trade Forecast, by 2025 China is predicted to overtake the US as the world’s top trading nation: it makes sense therefore for businesses to consider how best to maximise their trading relationships with Chinese firms and, with our international footprint and heritage in Asian markets, HSBC is ideally placed to help customers stay abreast of rapidly changing developments.

The RMB holds such huge potential for businesses across the globe, that for those focused on growing and cementing their international footprint, the question is not whether the currency should be considered, but when.

Loan portfolios can now be used as collateral thanks to new service developed by Markit and Euroclear

Thu, 22 Dec 2011 00:00:00 GMT

Markit and Euroclear Bank have signed an MoU to jointly create an operational infrastructure to support the use of loans as collateral in financing transactions. They will also collaborate on introducing a series of other services to enhance transparency, automation and trade settlement for the European leveraged loan market.

To enable the use of loans as collateral in financing transactions among trading counterparties and central banks, Markit will provide loan pricing and other market data to make it possible for Euroclear Bank to extend its pool of collateral to include loans in triparty collateral management transactions. Scheduled to be deployed in 2012, the joint service will increase refinancing possibilities for loan portfolios and diversify bank funding sources.

Other services planned by Markit and Euroclear Bank for the loan market include:
- the integration of Euroclear Bank’s delivery-versus-payment settlement
services with Markit ClearPar and Markit Clear, Markit’s electronic
platforms for loan trade settlement;
- a new asset servicing platform for syndicated loans that links Markit’s
loan messaging hub for agents and lenders with Euroclear Bank’s
expertise in event reporting and payment execution; and
- the use of Markit data to expand reconciliation services available through
Euroclear Bank’s LoanReach platform.

Joe Widner, managing director and global head of Loan Processing and Portfolio Management at Markit, commented: “Our shared goals are to help the market grow through new solutions such as using loans as collateral, and to reduce risks and inefficiencies by automating trade and cash settlement.” Jo Van de Velde, managing director and head of product management at Euroclear, added: “Financial institutions around the world will increasingly look at their loan portfolios as one of the means to obtain stable funding at attractive rates. Euroclear Bank’s existing LoanReach and triparty collateral management services, together with Markit’s loan products, will expand the pools of collateral available to our clients by including a new asset class."

Blackrock money market funds now available at Euroclear Bank for re-investing cash collateral

Tue, 13 Dec 2011 00:00:00 GMT

BlackRock has made its family of money market funds available to Euroclear Bank’s clients, enabling them to re-invest cash received as collateral in triparty transactions managed by Euroclear Bank.

The new service gives triparty cash collateral takers the option to re-invest cash into an array of money market funds seamlessly through FundSettle. FundSettle is Euroclear Bank’s dedicated platform for fund transaction processing. BlackRock is one of the first providers of money market funds for this purpose. The cash re-investment service is available in euros, British pounds and US dollars.

Jo Van de Velde, managing director and head of product management at Euroclear, said: “Our close co-operation with BlackRock, as one of the early
adopters to make their money market funds available, will meet the increasing demand from our clients to avoid re-deposit risks. Having multiple options
to re-invest cash collateral is a key requirement from market participants in the secured markets. By offering a seamless cash re-investment service in
money market funds to our clients, without any complexity, we add another dimension to delivering our post-trade made easy mission.”

Mark Stockley, managing director and head of international cash sales at BlackRock, said: “As an expert in liquidity management, BlackRock’s Cash Management Group is supportive of industry initiatives which provide solutions to our clients’ cash management needs.

German and Spanish banks face the biggest capital shortfalls, following latest stress tests

Thu, 08 Dec 2011 00:00:00 GMT

According to The European Banking Authority's (EBA) latest statistics regarding bank recapitalisation needs following the latest round of stress tests, show German and Spanish banks face some of the biggest shortfalls.

The EBA's latest figures published on the 8 December, show that German bank Commerzbank has a capital shortfall of EUR 5.3 billion when it comes to meeting requirements for a 9% core capital ratio by the summer of 2012. That fuelled media speculation that the bank may be "nationalised". According to the EBA's stats, Deutsche Bank has a capital shortfall of EUR 3.2 billion. German banks' total capital shortfall is now in the region of EUR 13 billion.

Other banks with high capital shortfalls in terms of meeting the EBA's 9% core capital target included Spain's Banco Santander, which is estimated to have a shortfall of EUR 15 billion. Belgium's Dexia Bank, which has already been nationalised, has a capital deficit of EUR6.3 billion, the EBA estimates, and Italy's UniCredit, a deficit of EUR 7.9 billion.

Capital shortfalls were based on September 2011 figures. The EBA said the capital buffers are designed to cover losses in sovereigns but to provide a reassurance to markets about the banks’ ability to withstand a range of shocks and still maintain adequate capital. "National supervisory authorities may, following consultation with the EBA, agree to the partial achievement of the target by the sales of selected assets that do not lead to a reduced flow of lending to the EU’s real economy but simply to a transfer of contracts or business units to a third party," the EBA stated.

Banks with capital deficits will have to submit plans detailing the actions they intend to take to reach the set targets by 20th January. These plans will have to be agreed with national authorities and reviewed, shared and consulted on with the EBA and with other relevant competent authorities.

Corporates and fund managers turn to FX options as volatility in currency markets continues

Thu, 08 Dec 2011 00:00:00 GMT

An analysis of client activity using Misys's Confirmation Matching Service (CMS) in 2011 compared to 2010 shows a rapid increase in the use of foreign exchange options by corporate and fund management clients. Combined with a 25% increase in active client sites, the rise demonstrates the heightened volatility in international currency markets, and the increasing need for corporations to review their hedging strategies in times of increasing uncertainty in the eurozone.

Taken from the activity of 130 of its more than 1,000 global clients, including all of the top 10 foreign exchange banks, Misys analysed the amount of options matched through its CMS solution and found that from September 2010 to September 2011 there had been an increase in matched trades of over 100%. The rise in the volume of FX options is part of a broader trend of corporations updating their hedging strategies owing to the uncertainty in the eurozone. FX options are now increasingly the strategy of choice as they provide much more flexibility and protection against the volatility.

“These are certainly increasingly difficult times for corporates to manage and mitigate FX risk,” said Stefan Lind, group treasurer at Saab AB., the global defence and security company. “We have found that we are increasingly hedging that risk with the use of FX options."

Misys CMS has been matching FX options for more than nine years, and now has more than 130 clients using the options module globally. Sixty-four bank sites currently use Misys CMS for options, including the top 10 global foreign exchange banks, and the solution is at the forefront of matching exotic options, successfully handling these for its clients since market readiness in March 2010.

“Clients such as Saab and Scania are coming to Misys to help them reduce operational processing risk by matching complex trades,” said Gilmore Bray, Global Managed Services diirector at Misys. “The growth in post-trade processing activity also comes at a time of increased active clients, which is up 25% showing a real move towards FX options, and an acknowledgement by our clients that Misys CMS is truly a multi-asset class service. It’s a challenging time for our clients, and simplifying the processing of complex trades through our solution can help them focus more on their strategies, and not have the worry and risk of manual post-trade processes.”

New VocaLink CEO aims to bring smarter payment solutions to international markets

Thu, 08 Dec 2011 00:00:00 GMT

VocaLink has appointed a new CEO. David Yates will take over as CEO from Marion King on 23 January 2012. He brings almost 30 years global experience in the payments and transaction processing industries. He will be focused on VocaLink’s ongoing investment in its core business as well as continuing to build solid foundations for future growth.

David joins VocaLink from Western Union where he was president of Business Development and Innovation and responsible for overseeing its electronic channels, prepaid, global top-up and loyalty businesses as well as leading Western Union’s Business Payments sector. Yates also spent six years at First Data Corporation, latterly as president of First Data International. In this role, he had executive management responsibility for all of First Data’s activities outside of the US including the merchant acquiring, merchant transaction processing, issuer processing and ATM network solutions business units.

Commenting on the appointment, Sir John Gieve, chairman of VocaLink, said: "David’s appointment comes at a significant time in the company’s growth. He brings extensive business development experience that will support our future objectives and I look forward to seeing David lead the organisation to further commercial success.”

David Yates said: “I am extremely pleased to be joining a company that is at the heart of payments innovation. I look forward to guiding our strategy to bring smarter payment solutions to international markets, as well as leading our continued focus on meeting the commercial needs of our customers.”

SIX Securities Services says CCP interoperabiity is working

Thu, 08 Dec 2011 00:00:00 GMT

Since the implementation of the CCP interoperability framework earlier this year, the clearing arm of SIX Securities Services, SIX x-clear Ltd, has increased its clearing market share for London Stock Exchange (LSE) transactions to a total of 27%. In effect, more than a quarter of blue-chip stocks traded on the LSE are being processed in Switzerland by SIX Securities Services. This is double the amount of only two months ago.

In addition, SIX Securities Services has become one of two central counterparties (CCPs) processing interoperable trades on BATS, with UBS as its first client. Urs Wieland, CEO of SIX x-clear Ltd, commented: “The signing of the interoperability agreement was a quantum leap that has enabled us to finally compete and offer our services across Europe. It has been a great year for us. Interoperability has allowed European markets to finally benefit from a greater choice of providers. Long term, this increased competition will lead to lower costs, greater transparency and ideally, higher service quality for all clients."

In 2012, SIX Securities Services will commence clearing for an additional four trading venues: Chi-X, Turquoise, NASDAQ OMX and Burgundy. Tapping the potential of these additional venues, the company is targeting volume growth of 80% in 2012, from 20% in 2011.

Tomas Kindler, head of clearing relations at SIX Securities Services, added: “Interoperability is no longer theory, it is a reality and it is working. We are very proud of our achievements and growth in 2011. With our first steps into Asia planned for 2012, we will be pushing interoperability to open up the Asian market to competition at the clearing layer.”

The Zurich-based global post-trade services provider also announced the opening of Vietnam and Bosnia-Herzegovina as new markets for its customers as well as plans to open Qatar by 12 December.

This is in addition to the eight new markets that it already announced earlier this year – Abu Dhabi, Dubai, Egypt, Israel, the Kingdom of Saudi Arabia, Peru, Cyprus and Colombia.

Deutsche Bank realigns Trust & Securities and Cash Management businesses for FIs

Thu, 08 Dec 2011 00:00:00 GMT

Deutsche Bank has realigned its Global Transaction Banking (GTB) division with Trust & Securities and Cash Management for Financial Institutions (CMFI) coming under the leadership of Satvinder Singh, global head of Trust & Securities Services and Cash Management for Financial Institutions.

Marcus Sehr is the new global head of CMFI and John Ball is global head of Cash Management for Financial Institutions sales. Additionally, the bank will align specialist sales activities within a new Financial Institutions and Securities sales team, led by Jim Turley, global head of Financial Institutions and Securities Sales and global chief operating officer for GTB.

In his new role, Sehr will oversee cash management strategy, P&L and delivery of end-to-end solutions and risk management in CMFI. John Ball will be responsible for driving cash management revenues globally in the financial institutions segment. He was previously head of Cash Management for financial institutions for Asia Pacific at Deutsche Bank. His responsibilities included overall client relationship management in Asia and Japan and new business development for cash management for financial institutions. Before joining Deutsche Bank, John was with Bankers Trust in London and New York. Based in Hong Kong, John will report to Jim Turley.

BNY Mellon launches derivatives margin management services

Wed, 30 Nov 2011 00:00:00 GMT

As the battle to provide collateral management services for OTC derivatives heats up, BNY Mellon has launched MarginEdge, a global derivatives margin management service that allows financial institutions, clearing members and central counterparties (CCPs) to manage margin collateral efficiently while balancing trading costs and capital requirements associated with listed, cleared over-the-counter (OTC) and bilateral OTC derivatives.

Through MarginEdge, market participants use BNY Mellon’s technology and expertise to reduce risk and increase efficiency in the complex derivatives collateral management process. In particular, MarginEdge helps segregate assets, supports transformation services, optimises the use and allocation of collateral, consolidates margin management across collateral locations and providers, and simplifies connectivity among market participants for margin movements.

“Given our global capabilities in servicing clients’ fixed income and equity collateral management needs, this strategic expansion into helping clients with their derivatives collateral management needs represents a natural evolution of our business model,” said James Malgieri, CEO of BNY Mellon Broker-Dealer Services. “We have the operational infrastructure and expertise, as well as a deep understanding of the global financial markets, which position us to meet our clients’ evolving needs anywhere in the world.”

“Global regulatory reforms are driving profound changes in the derivatives markets, making operational efficiencies, risk reduction and increased transparency the critical components in any derivatives margin process,” said John Vinci, global head of product management and strategy for BNY Mellon Broker-Dealer Services. “MarginEdge helps market participants navigate the challenge of managing the costs and operational complexities linked to regulatory changes while meeting their required financial performance and goals.”

BNY Mellon's Broker-Dealer Services is a leading provider of global and U.S. government securities clearance and collateral management solutions. It clears and settles equity and fixed income transactions in over 100 markets, and handles most of the transactions cleared through the Federal Reserve Bank of New York, for 17 of the 21 primary dealers. As a provider of tri-party collateral management services, it services over $1.8 trillion in daily tri-party balances worldwide.

BNY Mellon currently provides a suite of derivatives-related services through Derivatives360, which comprises a broad array of offerings for issuers and investors around the execution and processing of derivatives. These include trading and execution, collateral management and other middle office outsourcing services, as well as custody, accounting and consolidated reporting.

Fundtech and BankServ merge to offer "cutting edge" payment solutions

Wed, 30 Nov 2011 00:00:00 GMT

Fundtech has merged with GTCR-affiliated BankServ,giving it an expanded product line in wholesale banking and adding to its line of small-to-medium business products.

The combination also brings together Fundtech’s experience as the leading supplier of advanced software technology to large financial institutions with BankServ’s experience as the leading provider of SaaS to community and regional banks.

The announcement came after Fundtech completed its merger with F.T. Israeli Mergerco Ltd., an indirect, wholly-owned subsidiary of US FT Parent, Inc., both of which were formed by private equity firm, GTCR Fund X/A LP or its affiliates. The purchase price of USD 23.33 in cash, subject to applicable tax withholdings, for each ordinary share of Fundtech represents a transaction value of approximately USD 390 million.The merger comes following Fundtech's rejection of an earlier offer to merge with S1 Corporation.

Mr. Reuven Ben-Menachem will continue to serve as CEO of the company, which will no longer trade on the Nasdaq Global Market or the Tel Aviv Stock Exchange following the completion of the transaction. Dave Kvederis, BankServ’s CEO, will become a member of Fundtech’s Board of Directors.

The combined company expects to add significant value to its products by tightly integrating them. For example, combining BankServ’s Remote Deposit Capture products with Fundtech’s cash management products will create greater end-user utility and improved user experience. Both companies are innovators in SWIFT for Corporates service bureau business, and mobile financial services.

"The future of payments technology revolves around the more demanding digital customer," said Nancy Atkinson, senior analyst, Aite Group. "Fundtech and BankServ's union will offer customers a wide spectrum of cutting edge payments solutions. This ranges from a robust SOA platform for larger firms striving to revamp legacy technology all the way to SaaS applications for smaller firms to drive innovation while maintaining cost efficiency."

"Today’s banking customer requires a tailored approach to cash management. Capabilities such as remote deposit capture (RDC) alongside payments and electronic invoicing are in high demand, particularly via multiple channels including mobile,” said Bob Meara, senior analyst, Celent. “the combination of BankServ and Fundtech will help satisfy these new customer demands by providing banks of all sizes with an expanded cash management offering."

The combined company has estimated 2011 revenues of USD 200 million; and 1,300 employees who are active in every region of the world.

Citi launches direct clearing and custody in South Africa

Tue, 22 Nov 2011 00:00:00 GMT

Citigroup GTS has started providing Direct Custody and Clearing (DCC) services to clients in South Africa. This new offering expands Citi’s proprietary DCC network to 60 markets globally and 34 markets across EMEA.

Donna Oosthuyse, Citi Country Officer for South Africa said,Citi had a long-standing presence in the country and it looks forward to leveraging its local expertise and proactive engagement with customers, regulators as well as market infrastructures to generate new growth opportunities for clients.

Citi’s application to operate as a Central Securities Depository (CSD) participant was approved by the Controlling Body of Strate Ltd, South Africa’s authorised CSD and the Financial Services Board. Chief executive of Strate, Monica Singer, said “Citi has a long-established relationship with Strate as one of the founding shareholders back in 1998. We are pleased to welcome them as a new CSD participant in South Africa, providing custody and settlement services across all three of our markets, namely for equities, bonds and money market securities.”

Direct Custody and Clearing plays an integral role in the capital markets by providing clearing and settlement services for the trading and investing activities of broker dealers as well as offering local market sub-custody services to banks and global custodians around the world.

eBAM takes another step forward with RBS and IBM pilot

Tue, 22 Nov 2011 00:00:00 GMT

Royal Bank of Scotland Group (RBS) has successfully completed a pilot of eBAM (Electronic Bank Account Management) with IBM. As part of the pilot, IBM created account opening and maintenance requests using standardised XML messages, signed these messages using digital signatures and sent them to RBS via the SWIFT eBAM web portal.

RBS was the only bank based in Europe taking part in the SWIFT pilot. Three other global banks participated, as well as seven of the banks’ corporate clients. In the future, enabling eBAM via XML messages will cut out inefficiencies of paper based account management processes and allow for large corporations to connect to the bank directly via the SWIFT communications channel.

Stephan Vandewiele, head of Global Client Services, Global Transaction Services, RBS,said as a result of the successful pilot where IBM managed to send account opening requests for accounts in the Netherlands and the US successfully in a test environment, RBS was defining the next steps to provide eBAM to its clients. "The feedback from IBM regarding the pilot has been very valuable and positive and they can see that once in operation, such a service will allow them to gain efficiencies globally, which will enable further control and visibility of their accounts. As part of the pilot, RBS has also tested account openings in the Germany, France and the UK – all of which have been very successful”.

In support of eBAM development, RBS was involved in the definition of the ISO 20022-certified, bank-agnostic XML standard for account management-related messages that was tested during the pilot, and is a member of the Corporate Advisory Board that consists of SWIFT, banks and corporates.

In order to ensure consistent implementation of the standard, SWIFT provided the functionality to validate whether all test messages sent by banks, corporates and third-party ERP system vendors adhered to the standard. Furthermore, the pilot verified that these standardised XML messages could support the varying business processes of both corporations and banks. Key areas such as authorisation via a personal digital signature (SWIFT product: 3SKey) and functionality to look up requirements in a centralised database (documentation required for an account opening) were tested by the clients.

The clear benefits of standardisation and transparency that eBAM provides will ensure that both corporations and banks are eager to take the next steps towards eBAM. It is a joint journey for both banks and corporates to consolidate their information and to move the bank account management processes towards paper-free processes so that they can achieve the complete benefits of fully automated processing, enabled by eBAM.

PolarLake and Capgemini join forces to tackle reference data

Wed, 09 Nov 2011 00:00:00 GMT

The Financial Services Global Business Unit of Capgemini, and PolarLake, which provides a platform for reference data management (RDM) and distribution for financial institutions,have entered into an alliance to improve comprehensive enterprise data management for financial services companies.

The alliance combines PolarLake’s RDM software with Capgemini’s vast financial services domain expertise and global delivery capabilities to provide existing and prospective clients in financial services markets with significantly improved data management platforms that add scalability and efficiencies. This offering will also help clients cut down on the considerable costs associated with updating and maintaining complex, legacy enterprise data management systems that are often custom-made. As part of this alliance, Capgemini will establish PolarLake Centres of Excellence at its global delivery centres.

Increases in regulatory pressures, the need for clean reference data and verified transparency around sourcing and management are compelling companies to retrofit their data management capabilities, which can lead to higher total cost of ownership. The agreement between PolarLake and Capgemini will provide organisations with a reference data management solution that is specifically designed to meet these growing needs and provide a platform to meet future needs.

“Financial institutions worldwide are under pressure to find solutions to achieve compliance, gain efficiencies, reduce costs and add product delivery capabilities that will enable them to remain competitive in capital markets,” said Aloke Paskar, head of Capital Markets Business Unit, FS GBU Capgemini. “Capgemini established an alliance with PolarLake to combine its unique platform with our global execution capabilities, allowing our customers to implement data management solutions that encourage speed to market, flexibility and extensibility this competitive market demands.”

“Our partnership with Capgemini will help current and future clients manage their enterprise-wide data management and distribution platforms with increased agility, speed and adaptability while empowering the business and IT,” said John Randles, CEO, PolarLake.

BNP Paribas will privately label BNY Mellon solutions to service US cash management needs

Wed, 09 Nov 2011 00:00:00 GMT

BNP Paribas Corporate and Investment Bank and BNY Mellon announced an agreement that will enable BNP Paribas to expand its suite of global cash management solutions to include US services.

"Leveraging BNY Mellon’s technology and product strength in treasury services will allow us to build on our global cash management relationships and provide our clients with solutions that will further address their needs in the U.S. market,” said Walid Shuman, head of cash management Americas for BNP Paribas.

The agreement enables BNP Paribas to private label BNY Mellon’s payables and receivables services including controlled disbursement, lockbox, and payment outsourcing. The agreement includes the creation of a seamless interface between BNP Paribas and BNY Mellon’s systems and platforms. “We are confident this is the right strategy for us and our clients, especially in today’s challenging business environment,” added Mr. Shuman.

“Helping client banks succeed in a transactional ecosystem with ever increasing connectivity and technology requirements has been a longstanding strategic focus for BNY Mellon,” said J. David Cruikshank, executive vice president and chief executive officer of BNY Mellon Treasury Services. “We look forward to developing with BNP Paribas a strong level of support for their treasury services clients and adding an exciting new dimension of excellence to our delivery of private label solutions.”

Firms are moving away from a "box ticking" mentality when it comes to risk technology

Mon, 07 Nov 2011 00:00:00 GMT

Following the 2008 financial crisis, managing risk has become a major priority for a number of firms. Historically, however, the focus on risk management, particularly among financial services firms was largely driven by regulation.

While the industry now faces a "tsunami" of regulation on both sides of the Atlantic, Peyman Mestchian, managing partner of Chartis Research, says there is a quiet revolution taking place in the financial services industry, as the disciplines of risk and finance converge. So while once upon a time the chief risk officer (CRO) may not had a seat at the executive table, now Mestchian, says there is better alignment between the CFO and CRO, which is leading to a re-think of organisational structures, business processes and underlying technology architectures.

He points to a trend towards "value-based compliance" moving away from the traditional "box ticking" mentality. However, Mestchian says technology does not come cheap. Chartis estimates that in the financial services sector alone organisations will spend more than USD 23 billion in 2013. Much of the expenditure is driven by the proliferation of regulations such as Dodd- Frank, Basel II, Basel III and Solvency II. Different risk disciplines (market, credit, liquidity, operational risk) are also becoming more integrated as firms are encouraged to take a more "enterprise-wide" approach to risk management .

When it comes to the leading vendors in the risk management space, Chartis announced its annual RiskTech100® rankings. The top five places are occupied by IBM, SunGard, SAS, Oracle and Moody’s Analytics. Geographically, the list of top risk technology vendors is dominated by the US, with 50 companies, followed by the UK with 18 companies, France with seven and Canada with four.

Given the spate of consolidation in the risk management space in the last 18 to 24 months (Sophis being acquired by Misys, BAE System's acquisition of Norkom Technologies and IBM's acquisition of Algorithmics), Chartis predicts that more small-to-medium-sized risk management vendors will be acquired in the next few years as larger vendors look to plug gaps in their offering to provide firms with a more complete picture of risk.

For more information on the RiskTech100® click here.

Treasurers are changing the way they work to achieve greater transparency

Mon, 07 Nov 2011 00:00:00 GMT

Cash visibility and enhanced risk management, whether it is FX, credit, interest rate or commodity risk, are high on most corporate treasurers' agendas. Paul Bramwell, senior vice president, treasury solutions, SunGard AvantGard, says corporations are discovering new ways to harness technology to increase their cash visibility and better manage risk. This entails wholesale changes in the way they deploy technology and in their relationships with banks and trading partners.

"Corporations are finding better ways to work with their bank and trading partners by improving transparency to the financial supply chain and streamlining messaging and communications. They are also increasing deployment of treasury technology in private cloud environments, helping them realise greater efficiencies and reduce IT costs,” said Bramwell.

SunGard has identified 10 trends that are influencing how corporate CFO’s, treasurers and other finance executives operate their treasury departments and manage liquidity:

Corporations are striving to attain a holistic view of risk and are increasingly modeling multiple risk types such as FX, credit, market, interest rate and commodity.

There is a greater adoption of payment networks and exchanges.

Treasurers are looking to improve working capital through improved credit risk analysis and collections automation strategies, resulting in reduced borrowing margins.

Corporations are looking to streamline and consolidate their payment flows.

There will be a continued movement towards outsourcing transactional treasury functions.

More corporations are turning to consolidated technology hubs for multibank connectivity, including embedded services such as eBAM and managed connectivity to the SWIFT network.

An increasing number of corporations, particularly those in Asia, the Middle East and South Africa, are centralising their treasury operations for increased transparency and efficiency.

Corporations are becoming more educated about cloud services and security and are increasingly choosing to deploy their treasury technology in private cloud-hosted environments.

Treasurers are increasingly seeking up-to date, enterprise-wide views of FX and interest rate risk positions with real time debt & investment reporting.

Corporations continue to review financial messaging standards, such as ISO 20022, CGI and SWIFT’s 3SKey, as well as prepare for SEPA compliance.

SunGard takes a whimsical look at the evolving role of the Treasurer. View the animation here: http://www.youtube.com/watch?v=qT308Ld0y4Y

Cybersecurity threat could bring down banks

Mon, 31 Oct 2011 00:00:00 GMT

The UK is at the centre of the cybersecurity debate as the Government hosts the London Cyberspace Conference in November. State-sponsored online espionage and threats to the critical national infrastructure of developed economies from cyber attacks have focused minds on the urgent challenge of cybersecurity.

For the financial services sector, where credibility is king, cybersecurity is a truly business critical question. However, the responsibility for fending off these digital intrusions rests uneasily across state and private sector players, but their joint efforts are needed to protect the collection of vital national economic interests.

The Cyberspace Conference details, “Where the balance of responsibility lies for crime prevention between governments, industry and individuals,” as one of the issues delegates will consider. However, the theory may be easier than the practice.

Working through US research group The Ponemon Institute, Hewlett-Packard (HP) has spoken to 131 senior security managers from 89 major organisations in the US and Europe to produce the Cybersecurity Readiness Survey 2010. US and European financial

services participants totalled a quarter respectively.

While banks have long recognised the need for secure technology, one dilemma thrown up by the cybersecurity debate presents a challenge to established thinking in financial institutions. Across the business community there is a reluctance to admit any arm of government into their security arrangements.

The survey shows 80% of organisations expect a serious cyber attack in the near future, but over half of them, 51%, wish to be left alone to deter the threat without state involvement. In fact only 11% of European respondents and 19% of US ones embraced a collaborative strategy including other industries and government.

The survey does not preclude future cooperation with government. However Europeans are noticeably more reluctant to contemplate this than their US counterparts, 65% and 44% respectfully. This attitude could reflect a wider distrust of government fuelled by numerous high-profile information security lapses. For the financial sector, client confidentiality will always trump the benefits of collaborative action.

However, if a financial institution loses its reputation for securing client confidential data the consequences may threaten its very survival. The study underlines this point with what is perhaps the most alarming finding for financial institutions. It shows that 78% of US and 62% of European respondents think a serious cyber attack may diminish their organisation’s economic viability, bottom line or mission. It is this economic consequence that may focus industry minds.

A second Ponemon Institute study, commissioned by HP, The Cost of Cyber Crime, 2011 revealed the financial services; utilities and energy; and defence sectors all experience higher cyber crime costs compared to other sectors such as retail. With the study estimating the median annualised cost of cybercrime being USD 5.9 million per year, (based on a survey of 50 large US organisations from a cross-section of industries), the likely impact on the bottom line is significant.

Furthermore, with cyberattacks becoming ever more common this impact is potentially set only to increase. Over a four-week period, the organisations surveyed experienced 72 successful attacks per week, an increase of nearly 45% from 2010. Plus if not resolved quickly costs can spiral. The average time to resolve a cyberattack was 18 days, with an average cost to participating organisations of nearly USD 416,000. Yet in the US and Europe only 38% of security professionals have seen an increase in investment to mitigate or curtail cybersecurity threats (Cybersecurity Readiness Study 2010).

The findings of these reports are sobering, shedding light on the scale of the cybersecurity menace. Given the extent to which financial institutions rely on an image of competency and trustworthiness, it is hardly surprising that cyber intrusion strikes them as so dangerous. The interruption of services, theft of information assets and corruption of information all loom large as reasons why cyber crime cannot be disregarded.

As the London Conference may hint, formal cooperation between government and commercial technology managers is inevitable, primarily because the consequence of not on all could be significant. The challenge though to make it work is plain to see.

Peter McAllister is a security expert practice leader for HP Information Security